LONDON (Reuters) - Spain's Santander (SAN.MC: Quote, Profile, Research) said its UK bank Abbey aimed to target riskier areas of the mortgage and lending markets to compete with more aggressive rivals.

Santander, which bought Abbey for over 8 billion pounds last November, said on Tuesday its attempt to revive the business was on track but the turnaround would take two more years and result in more job cuts.

The Spanish bank said it aimed to increase revenue at Abbey by 5 to 10 percent annually over the next three years and acknowledged it was lagging rivals, with Abbey's sales productivity 15 to 35 percent below the average of its peers and significantly behind the best in the market.

Abbey contributed 492 million euros to Santander's profit in the first nine months of the year, with net interest income at its personal financial services business "modestly higher" in the latest quarter compared to a year ago.

Abbey said it aimed to maintain and then expand positions in its core mortgage and savings markets and to enter higher-margin mortgage segments in the next two years.

It said these areas -- notably buy-to-let, new-build and sub-prime mortgages -- represented about a fifth of the mortgage market but had not been targeted by Abbey.

Abbey said it also planned to "grow aggressively" in areas where it is under-represented including current accounts, unsecured loans, investments and pensions and that it aimed to develop consumer finance and business banking.

Costs are also coming down but are well above those of rivals. Santander said it aimed to cut the ratio of Abbey's costs to its income to 45 percent by 2008 from 63 percent now and 70 percent before, and nearer the industry average of about 45 to 50 percent.

This is cache, read story here